united states
securities and exchange commission
washington, d.c. 20549
form n-csr
certified shareholder report of registered management
investment companies
Investment Company Act file number 811-08037
AdvisorOne Funds
(Exact name of registrant as specified in charter)
17605 Wright Street Suite 2, Omaha, NE 68130
(Address of principal executive offices) (Zip code)
Gemini Fund Services, LLC., 80 Arkay Drive, Suite 110 , Hauppauge, NY 11788
(Name and address of agent for service)
Registrant's telephone number, including area code: 631-470-2600
Date of fiscal year end: 11/30
Date of reporting period: 5/31/15
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
Semi - Annual Report |
MAY 31, 2015 |
ADVISOR |
CLS Investments, LLC |
Distributed by Northern Lights Distributors, LLC, Member FINRA |
This report and the financial statements contained herein are submitted for the general information of shareholders and are not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or solicitation of an offer to buy shares of Milestone Treasury Obligations Fund.
MILESTONE TREASURY OBLIGATIONS FUND
Letter to Our Shareholders
May 31, 2015
Dear Investors:
During the past six months, the Milestone Treasury Obligations Fund focused on its conservative investment philosophy and management discipline. We are proud to provide this semi-annual report which highlights the results of our conservative, compliance-driven investment philosophy.
As we look ahead to the remainder of 2015, we remain committed to our mission and values. We look forward to continuing to work in partnership with you all to address your liquidity objectives and cash management priorities. We will continue to explore new cash management capabilities in direct response to requests from both current and prospective investors.
Thank you again for investing in the Milestone Treasury Obligations Fund and feel free to contact us directly to tell us how we can be of service to you. We welcome your feedback and input as we continue to uphold our commitment to you based on our core principles.
Best regards,
Marc Pfeffer
CLS Investments, LLC
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
1979-CLS-7/8/2015
6232-NLD-7/8/2015
1
Milestone Treasury Obligations Fund
PORTFOLIO SUMMARY (Unaudited)
May 31, 2015
PORTFOLIO BREAKDOWN
All data is as of May 31, 2015. The Portfolio breakdown is expressed as a percentage of total investments and may vary over time.
Please refer to the Portfolio of Investments for a detailed analysis of the Fund’s holdings.
2
Milestone Treasury Obligations Fund
PORTFOLIO OF INVESTMENTS (Unaudited)
May 31, 2015
Principal | Interest | Maturity | Value | |||||||||
Amount | Rate | Date | (Note 1) | |||||||||
U.S. Government Obligations - 28.0% | ||||||||||||
U.S. Treasury Bills * - 25.4% | ||||||||||||
$ | 20,000,000 | 0.000% | 6/25/15 | $ | 19,997,933 | |||||||
15,000,000 | 0.000% | 7/30/15 | 14,998,193 | |||||||||
10,000,000 | 0.000% | 8/20/15 | 9,998,534 | |||||||||
10,000,000 | 0.000% | 8/27/15 | 9,998,405 | |||||||||
25,000,000 | 0.000% | 10/8/15 | 24,993,550 | |||||||||
15,000,000 | 0.000% | 10/22/15 | 14,994,638 | |||||||||
94,981,253 | ||||||||||||
U.S. Treasury Notes - 2.6% | ||||||||||||
10,000,000 | 0.375% | 6/30/15 | 10,001,867 | |||||||||
10,001,867 | ||||||||||||
Total U.S. Government Obligations (Cost $104,983,120) | 104,983,120 |
Repurchase Agreements - 72.0%
BNP Paribas Securities Corp., dated 5/29/2015, repurchase price $70,000,000 (Collateralized by: U.S Treasury Bill: $1,922,800, 0.000%, 09/03/2015; aggregate market value plus accrued interest $1,922,723; U.S. Treasury Floating Rate Notes: $12,994,900, 0.084% - 0.085%, 04/30/2016 - 07/31/2016; aggregate market value plus accrued interest $12,996,983; U.S. Treasury Notes: $55,856,597, 1.500% - 4.625%, 11/15/2016 - 11/30/2019; aggregate market value plus accrued interest $56,480,385)
70,000,000 | 0.090% | 6/1/15 | 70,000,000 |
Credit Suisse Securities (USA) LLC, dated 5/29/2015, repurchase price $75,000,000 (Collateralized by: U.S. Treasury Bonds: $12,224,700, 8.000% - 10.625%, 8/15/2015 - 11/15/2021; aggregate market value plus accrued interest $15,232,234; U.S. Treasury Notes: $56,207,042, 0.025% - 4.875%, 6/30/2015 - 11/30/2021; aggregate market value plus accrued interest $57,862,049; U.S. Treasury Floating Rate Note: $3,409,300, 0.000% - 0.089%, 1/31/2016 - 10/31/2016; aggregate market value plus accrued interest $3,409,273)
75,000,000 | 0.100% | 6/1/15 | 75,000,000 |
Merrill Lynch Fenner Pierce & Smith Inc., dated 5/29/2015, repurchase price $34,400,000 (Collateralized by: U.S. Treasury Floating Rate Note: $35,087,200, 0.000%, 4/30/2017; aggregate market value plus accrued interest $35,088,025)
34,400,000 | 0.070% | 6/1/15 | 34,400,000 |
See notes to financial statements.
3
Milestone Treasury Obligations Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
May 31, 2015
Principal | Interest | Maturity | Value | |||||||||
Amount | Rate | Date | (Note 1) | |||||||||
Repurchase Agreements - 72.0% (Cont.)
Societe Generale, dated 5/29/2015, repurchase price $90,000,000 (Collateralized by: U.S. Treasury STRIPS: $1, 0.000%, 5/15/2038; aggregate market value plus accrued interest $1; U.S. Treasury Notes: $11,318,225, 1.500% - 2.125%, 2/28/2019 - 9/30/2021; aggregate market value plus accrued interest $11,576,277; U.S. Treasury Inflationary Notes: $64,957,000, 0.125%, 4/15/2017 - 4/15/2020; aggregate market value plus accrued interest $68,045,938; U.S. Treasury Inflationary Bonds: $12,456,000, 0.625% - 0.750%, 4/15/2042 - 2/15/2045; aggregate market value plus accrued interest $12,176,766; U.S. Treasury Bond: $1,100, 2.500%, 2/15/2045; aggregate market value plus accrued interest $1,019)
$ | 90,000,000 | 0.110% | 6/1/15 | $ | 90,000,000 |
Total Repurchase Agreements (Cost $269,400,000) | 269,400,000 | |||
Total Investments (Cost $374,383,120) - 100.0% (a) | $ | 374,383,120 | ||
Liabilities in Excess of Other Assets - (0.0)% | (171,422 | ) | ||
Net Assets-100.0% | $ | 374,211,698 |
STRIPS - Separate Trading of Registered Interest and Principal Securities. Treasury STRIPS are fixed-income securities sold at a significant discount to face value and offer no interest payments because they mature at par.
* | Coupon rate shown is the discounted rate at time of purchase for U.S. Treasury Bills. |
(a) | The cost stated also approximates the aggregate cost for Federal income tax purposes. |
See notes to financial statements.
4
Milestone Treasury Obligations Fund
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
May 31, 2015
ASSETS | ||||
Investments, at value and cost | $ | 104,983,120 | ||
Repurchase agreements, at value and cost | 269,400,000 | |||
Receivable due from Advisor | 60,517 | |||
Interest receivable | 17,922 | |||
Prepaid expenses and other assets | 11,713 | |||
TOTAL ASSETS | 374,473,272 | |||
LIABILITIES | ||||
Fees payable to other affiliates | 77,626 | |||
Compliance officer fees payable | 8,152 | |||
Due to Custodian | 7,685 | |||
Accrued trustee fees | 2,813 | |||
Dividends payable | 1,548 | |||
Accrued expenses and other liabilities | 163,750 | |||
TOTAL LIABILITIES | 261,574 | |||
NET ASSETS | $ | 374,211,698 | ||
Net Assets Consist Of: | ||||
Shares of beneficial interest ($0 par value, unlimited shares authorized) | $ | 374,209,080 | ||
Accumulated net realized gain from security transactions | 2,618 | |||
NET ASSETS | $ | 374,211,698 |
See notes to financial statements.
5
Milestone Treasury Obligations Fund
STATEMENT OF ASSETS AND LIABILITIES (Undaudited) (Continued)
May 31, 2015
Net Asset Value Per Share: | ||||
Investor Shares: | ||||
Net Assets | $ | 27,703,783 | ||
Shares of beneficial interest outstanding | 27,675,201 | |||
Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share | $ | 1.00 | ||
Institutional Shares: | ||||
Net Assets | $ | 280,525,606 | ||
Shares of beneficial interest outstanding | 280,416,186 | |||
Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share | $ | 1.00 | ||
Financial Shares: | ||||
Net Assets | $ | 15,077,322 | ||
Shares of beneficial interest outstanding | 15,097,135 | |||
Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share | $ | 1.00 | ||
Premium Shares: | ||||
Net Assets | $ | 50,904,987 | ||
Shares of beneficial interest outstanding | 50,965,129 | |||
Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share | $ | 1.00 |
See notes to financial statements.
6
Milestone Treasury Obligations Fund
STATEMENT OF OPERATIONS (Unaudited)
For the Six Months Ended May 31, 2015
INVESTMENT INCOME | ||||
Interest | $ | 182,977 | ||
TOTAL INVESTMENT INCOME | 182,977 | |||
EXPENSES | ||||
Investment advisory fees | 226,754 | |||
Distribution (12b-1) fees: | ||||
Premium Shares | 55,257 | |||
Shareholder service fees: | ||||
Institutional Shares | 175,214 | |||
Premium Shares | 55,258 | |||
Investor Shares | 35,677 | |||
Financial Shares | 7,583 | |||
Administrative services fees | 75,199 | |||
Registration fees | 34,904 | |||
Printing and postage expenses | 11,830 | |||
Professional fees | 8,008 | |||
Trustees fees and expenses | 7,098 | |||
Accounting services fees | 5,824 | |||
Transfer agent fees | 5,824 | |||
Compliance officer fees | 2,743 | |||
Other expenses | 28,481 | |||
TOTAL EXPENSES | 735,654 | |||
Less: Expense Reimbursements/waivers | (564,013 | ) | ||
NET EXPENSES | 171,641 | |||
NET INVESTMENT INCOME | 11,336 | |||
REALIZED GAIN ON INVESTMENTS | ||||
Net realized gain from security transactions | 2,800 | |||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 2,800 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 14,136 |
See notes to financial statements.
7
Milestone Treasury Obligations Fund
STATEMENTS OF CHANGES IN NET ASSETS
For the | For the | |||||||
Six Months Ended | Year Ended | |||||||
May 31, 2015 | November 30, 2014 | |||||||
(Unaudited) | ||||||||
INCREASE IN NET ASSETS FROM: | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 11,336 | $ | 18,032 | ||||
Net realized gain (loss) from security transactions | 2,800 | (182 | ) | |||||
Net increase in net assets resulting from operations | 14,136 | 17,850 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income: | ||||||||
Investor Shares | (713 | ) | (1,688 | ) | ||||
Institutional Shares | (8,757 | ) | (9,737 | ) | ||||
Financial Shares | (759 | ) | (4,445 | ) | ||||
Premium Shares | (1,107 | ) | (2,162 | ) | ||||
Net decrease in net assets from distributions to shareholders | (11,336 | ) | (18,032 | ) | ||||
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST * | ||||||||
Proceeds from shares sold: | ||||||||
Investor Shares | 54,004,772 | 99,921,567 | ||||||
Institutional Shares | 1,518,828,383 | 2,032,301,834 | ||||||
Financial Shares | 524,979,749 | 1,284,388,500 | ||||||
Premium Shares | 17,764,672 | 33,848,684 | ||||||
Net asset value of shares issued in reinvestment of distributions: | ||||||||
Investor Shares | 423 | 867 | ||||||
Institutional Shares | 298 | 407 | ||||||
Financial Shares | 1 | 2 | ||||||
Capital contribution by Adviser: | ||||||||
Financial Shares | 53,258 | — | ||||||
Payments for shares redeemed: | ||||||||
Investor Shares | (69,540,368 | ) | (107,512,846 | ) | ||||
Institutional Shares | (1,619,512,828 | ) | (1,731,058,719 | ) | ||||
Financial Shares | (577,482,719 | ) | (1,274,765,389 | ) | ||||
Premium Shares | (6,336,534 | ) | (33,005,487 | ) | ||||
Net increase (decrease) in net assets from shares of beneficial interest | (157,240,893 | ) | 304,119,420 | |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (157,238,093 | ) | 304,119,238 | |||||
NET ASSETS | ||||||||
Beginning of Period | 531,449,791 | 227,330,553 | ||||||
End of Period ** | $ | 374,211,698 | $ | 531,449,791 | ||||
* Share transactions at net asset value of $1.00 per share | ||||||||
** Includes undistributed net investment income of: | $ | — | $ | — |
See notes to financial statements.
8
Milestone Treasury Obligations Fund
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
For the | For the | |||||||
Six Months Ended | Year Ended | |||||||
May 31, 2015 | November 30, 2014 | |||||||
(Unaudited) | ||||||||
SHARE ACTIVITY | ||||||||
Investor Shares: | ||||||||
Shares Sold | 54,004,772 | 99,921,567 | ||||||
Shares Reinvested | 423 | 867 | ||||||
Shares Redeemed | (69,540,368 | ) | (107,512,846 | ) | ||||
Net decrease in shares of beneficial interest outstanding | (15,535,173 | ) | (7,590,412 | ) | ||||
Institutional Shares: | ||||||||
Shares Sold | 1,518,828,383 | 2,032,301,834 | ||||||
Shares Reinvested | 298 | 407 | ||||||
Shares Redeemed | (1,619,512,828 | ) | (1,731,058,719 | ) | ||||
Net increase (decrease) in shares of beneficial interest outstanding | (100,684,147 | ) | 301,243,522 | |||||
Financial Shares: | ||||||||
Shares Sold | 524,979,749 | 1,284,388,500 | ||||||
Shares Reinvested | 1 | 2 | ||||||
Shares Redeemed | (577,482,719 | ) | (1,274,765,389 | ) | ||||
Net increase (decrease) in shares of beneficial interest outstanding | (52,502,969 | ) | 9,623,112 | |||||
Premium Shares: | ||||||||
Shares Sold | 17,764,672 | 33,848,684 | ||||||
Shares Redeemed | (6,336,534 | ) | (33,005,487 | ) | ||||
Net increase in shares of beneficial interest outstanding | 11,428,138 | 843,197 |
See notes to financial statements.
9
Milestone Treasury Obligations Fund
FINANCIAL HIGHLIGHTS
Investor Shares | ||||||||||||||||||||||||
Six Months Ended | Year Ended November 30, | |||||||||||||||||||||||
May 31, 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (b) | ||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | ||||||||||||
Net realized gains | — | — | (0.000 | ) (b) | — | — | — | |||||||||||||||||
Total distributions | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | ||||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||
Total return | 0.00 | % (g) | 0.00 | % | 0.00 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||
Net assets, at end of period (000s) | $ | 27,704 | $ | 43,239 | $ | 50,829 | $ | 54,039 | $ | 53,492 | $ | 52,814 | ||||||||||||
Ratio of gross expenses to average net assets (c) | 0.43 | % (h) | 0.45 | % | 0.41 | % | 0.46 | % | 0.55 | % | 0.59 | % | ||||||||||||
Ratio of net expenses to average net assets | 0.08 | % (d,h) | 0.06 | % (d) | 0.10 | % (d) | 0.18 | % (d) | 0.13 | % (e) | 0.19 | % (e) | ||||||||||||
Ratio of net investment income to average net assets | 0.00 | % (f,h) | 0.00 | % (f) | 0.00 | % (f) | 0.01 | % | 0.00 | % (f) | 0.00 | % (f) |
(a) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(b) | Amount represents less than $0.001 per share. |
(c) | Represents the ratio of expenses to average net assets absent fee waivers and/or expense reimbursements by the Adviser. |
(d) | The Adviser, CLS Investments, LLC, has agreed to waive additional fees in order to maintain a positive return. The additional waiver, 0.27%, 0.16% and 0.16% for the periods ended November 30, 2012, November 30, 2013 and November 30, 2014 respectively, and 0.12% for the six months ended May 31, 2015, decreased the net expense ratio. |
(e) | The previous Adviser, Milestone Capital Management, LLC, had agreed to waive additional fees in order to maintain a positive return. The additional waiver, 0.26%, and 0.32% for the periods ended November 30, 2010 through November 30, 2011, respectively, decreased the net expense ratio. A portion of the fees for the period ended November 30, 2011 were waived by CLS Investments, LLC. |
(f) | Less than 0.005%. |
(g) | Not annualized. |
(h) | Annualized. |
See notes to financial statements.
10
Milestone Treasury Obligations Fund
FINANCIAL HIGHLIGHTS
Institutional Shares | ||||||||||||||||||||||||
Six Months Ended | Year Ended November 30, | |||||||||||||||||||||||
May 31, 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (b) | ||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | ||||||||||||
Net realized gains | — | — | (0.000 | ) (b) | — | — | — | |||||||||||||||||
Total distributions | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | ||||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||
Total return | 0.00 | % (g) | 0.00 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||
Net assets, at end of period (000s) | $ | 280,526 | $ | 381,208 | $ | 79,964 | $ | 75,810 | $ | 240,723 | $ | 365,139 | ||||||||||||
Ratio of gross expenses to average net assets (c) | 0.28 | % (h) | 0.30 | % | 0.27 | % | 0.30 | % | 0.34 | % | 0.35 | % | ||||||||||||
Ratio of net expenses to average net assets | 0.08 | % (d,h) | 0.06 | % (d) | 0.09 | % (d) | 0.14 | % (d) | 0.13 | % (e) | 0.19 | % (e) | ||||||||||||
Ratio of net investment income to average net assets | 0.01 | % (h) | 0.00 | % (f) | 0.01 | % | 0.01 | % | 0.00 | % (f) | 0.01 | % |
(a) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(b) | Amount represents less than $0.001 per share. |
(c) | Represents the ratio of expenses to average net assets absent fee waivers and/or expense reimbursements by the Adviser. |
(d) | The Adviser, CLS Investments, LLC, has agreed to waive additional fees in order to maintain a positive return. The additional waiver, 0.06%, 0.08% and 0.14% for the periods ended November 30, 2012, November 30, 2013 and November 30, 2014 , respectively, and 0.12% for the six months ended May 31, 2015, decreased the net expense ratio. |
(e) | The previous Adviser, Milestone Capital Management, LLC, had agreed to waive additional fees in order to maintain a positive return. The additional waiver, 0.01% and 0.07%, for the periods ended November 30, 2010 through November 30, 2011, respectively, decreased the net expense ratio. A portion of the fees for the period ended November 30, 2011 were waived by CLS Investments, LLC. |
(f) | Less than 0.005%. |
(g) | Not annualized. |
(h) | Annualized. |
See notes to financial statements.
11
Milestone Treasury Obligations Fund
FINANCIAL HIGHLIGHTS
Financial Shares | ||||||||||||||||||||||||
Six Months Ended | Year Ended November 30, | |||||||||||||||||||||||
May 31, 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.001 | |||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.001 | ) | ||||||||||||
Net realized gains | — | — | (0.000 | ) (b) | — | — | — | |||||||||||||||||
Total distributions | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.001 | ) | ||||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||
Total return | 0.00 | % (g) | 0.00 | % | 0.01 | % | 0.02 | % | 0.02 | % | 0.05 | % | ||||||||||||
Net assets, at end of period (000s) | $ | 15,077 | $ | 67,527 | $ | 57,904 | $ | 63,374 | $ | 187,070 | $ | 520,606 | ||||||||||||
Ratio of gross expenses to average net assets (c) | 0.23 | % (h) | 0.24 | % | 0.23 | % | 0.26 | % | 0.24 | % | 0.20 | % | ||||||||||||
Ratio of net expenses to average net assets | 0.08 | % (d,h) | 0.06 | % (d) | 0.09 | % (d) | 0.14 | % (d) | 0.12 | % (e) | 0.15 | % | ||||||||||||
Ratio of net investment income to average net assets | 0.00 | % (f,h) | 0.00 | % (f) | 0.01 | % | 0.02 | % | 0.02 | % | 0.05 | % |
(a) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(b) | Amount represents less than $0.001 per share. |
(c) | Represents the ratio of expenses to average net assets absent fee waivers and/or expense reimbursements by the Adviser. |
(d) | The Adviser, CLS Investments, LLC, has agreed to waive additional fees in order to maintain a positive return. The additional waiver, 0.01%, 0.03% and 0.09% for the periods ended November 30, 2012, November 30, 2013, and November 30, 2014, respectively, and 0.07% for the six months ended May 31, 2015, decreased the net expense ratio. |
(e) | The previous Adviser, Milestone Capital Management, LLC, had agreed to waive additional fees in order to maintain a positive return. The additional waiver, 0.03%, for the period ended November 30, 2011, decreased the net expense ratio. A portion of the fees for the period ended November 30, 2011 were waived by CLS Investments, LLC. |
(f) | Less than 0.005%. |
(g) | Not annualized. |
(h) | Annualized. |
See notes to financial statements.
12
Milestone Treasury Obligations Fund
FINANCIAL HIGHLIGHTS
Premium Shares | ||||||||||||||||||||||||
Six Months Ended | Year Ended November 30, | |||||||||||||||||||||||
May 31, 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (a,b) | 0.000 | (b) | ||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | (0.000 | ) (b) | ||||||||||||
Net realized gains | — | — | (0.000 | ) (b) | — | — | — | |||||||||||||||||
Total distributions | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | (0.000 | ) | ||||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||
Total return | 0.00 | % (g) | 0.00 | % | 0.00 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||||
Net assets, at end of period (000s) | $ | 50,905 | $ | 39,477 | $ | 38,633 | $ | 48,238 | $ | 47,872 | $ | 365,987 | ||||||||||||
Ratio of gross expenses to average net assets (c) | 0.68 | % (h) | 0.70 | % | 0.67 | % | 0.71 | % | 0.70 | % | 0.65 | % | ||||||||||||
Ratio of net expenses to average net assets | 0.08 | % (d,h) | 0.06 | % (d) | 0.10 | % (d) | 0.19 | % (d) | 0.13 | % (e) | 0.19 | % (e) | ||||||||||||
Ratio of net investment income to average net assets | 0.00 | % (f,h) | 0.00 | % (f) | 0.00 | % (f) | 0.01 | % | 0.00 | % (f) | 0.00 | % (f) |
(a) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(b) | Amount represents less than $0.001 per share. |
(c) | Represents the ratio of expenses to average net assets absent fee waivers and/or expense reimbursements by the Adviser. |
(d) | The Adviser, CLS Investments, LLC, has agreed to waive additional fees in order to maintain a positive return. The additional waiver, 0.46%, 0.17% and 0.16% for the periods ended November 30, 2012, November 30, 2013 and November 30, 2014, respectively, and 0.12% for the six months ended, May 31, 2015, decreased the net expense ratio. |
(e) | The previous Adviser, Milestone Capital Management, LLC, had agreed to waive additional fees in order to maintain a positive return. The additional waivers, 0.46%, and 0.52%, for the periods ended November 30, 2010 through November 30, 2011, respectively, decreased the net expense ratio. A portion of the fees for the period ended November 30, 2011 were waived by CLS Investments, LLC. |
(f) | Less than 0.005%. |
(g) | Not annualized. |
(h) | Annualized. |
See notes to financial statements.
13
Milestone Treasury Obligations Fund |
NOTES TO FINANCIAL STATEMENTS (Unaudited) |
May 31, 2015 |
NOTE 1. ORGANIZATION
The Milestone Treasury Obligations Fund (the “Fund”), formerly known as the Treasury Obligations Portfolio (“Predecessor Fund”), was reorganized into the AdvisorOne Funds (the “Trust”) on January 23, 2012. The Fund is a diversified series of the Trust. The Trust was formed as a Delaware business trust in December 1996 and is registered as an open-end, management investment company under the Investment Company Act of 1940. The Predecessor Fund was a series of the Milestone Funds, a Delaware business trust formed on July 14, 1994. The Fund is registered as an open-end, management investment company under the Investment Company Act of 1940 and authorized to issue an unlimited number of shares of beneficial interest without par value of four classes of shares: Investor Shares, Institutional Shares, Financial Shares and Premium Shares. The Fund is a money market fund that seeks to provide its shareholders with the maximum current income that is consistent with the preservation of capital and the maintenance of liquidity.
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services—Investment Companies”.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the Fund in preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates.
Valuation of Securities – Securities in which the Fund invests may be valued at amortized cost. Under the amortized cost method, a portfolio instrument is valued at cost and any premium or discount is amortized to maturity. Amortization of premium and accretion of market discount are charged to income.
The Fund may hold securities for which market quotations are not readily available or are determined to be unreliable. These securities will be valued at their fair market value as determined using the “fair value” procedures approved by the Trust’s Board of Trustees (the “Board”). The Board reviews and ratifies the execution of this process and the resultant fair value prices at least quarterly to assure the process produces reliable results.
Fair Valuation Process – The fair value team is composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) adviser. The applicable investments are valued collectively via inputs from each of these groups. For example, fair value determinations are required for the following
14
Milestone Treasury Obligations Fund |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
May 31, 2015 |
securities: (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source), (ii) securities for which, in the judgment of the adviser, the prices or values available do not represent the fair value of the instrument. Factors which may cause the adviser to make such a judgment include, but are not limited to, the following: only a bid price or an asked price is available; the spread between bid and asked prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred (a “significant event”) since the closing prices were established on the principal exchange on which they are traded, but prior to the Fund’s calculation of its net asset value. Specifically, interests in commodity pools or managed futures pools are valued on a daily basis by reference to the closing market prices of each futures contract or other asset held by a pool, as adjusted for pool expenses. Restricted or illiquid securities, such as private placements or non-traded securities are valued via inputs from the adviser based upon the current bid for the security from two or more independent dealers or other parties reasonably familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate under the circumstances). If the adviser is unable to obtain a current bid from such independent dealers or other independent parties, the fair value team shall determine the fair value of such security using the following factors: (i) the type of security; (ii) the cost at date of purchase; (iii) the size and nature of the Fund’s holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.
The Fund utilizes various methods to measure the fair value of all of its investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of input are:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities that the Fund has the ability to access.
Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument in an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
15
Milestone Treasury Obligations Fund |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
May 31, 2015 |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following tables summarize the inputs used as of May 31, 2015 for the Fund’s investments measured at fair value:
Assets * | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
U.S. Government Obligations | $ | — | $ | 104,983,120 | $ | — | $ | 104,983,120 | ||||||||
Repurchase Agreements | 269,400,000 | — | 269,400,000 | |||||||||||||
Total Investments | $ | — | $ | 374,383,120 | $ | — | $ | 374,383,120 |
The Fund did not hold any Level 3 securities during the period. There were no transfers into or out of Level 1 & Level 2 as of May 31, 2015. It is the Fund’s policy to recognize transfers between Level 1 & Level 2 at the end of the reporting period.
* | Refer to the Portfolio of Investments for security classifications. |
Repurchase Agreements – The Fund may purchase securities from financial institutions subject to the seller’s agreement to repurchase and the Fund’s agreement to resell the securities at par. The investment adviser only enters into repurchase agreements with financial institutions that are primary dealers and deemed to be creditworthy by the investment adviser in accordance with procedures adopted by the Board of Trustees. Securities purchased subject to repurchase agreements are maintained with a custodian of the Fund and must have, at all times, an aggregate market value plus accrued interest greater than or equal to the repurchase price. If the market value of the underlying securities falls below 102% of the value of the repurchase price, the Fund will require the seller to deposit additional collateral by the next business day. In the event that the seller under the agreement defaults on its repurchase obligation or fails to deposit sufficient collateral, the Fund has the contractual right, subject to the requirements of applicable bankruptcy and insolvency laws, to sell the underlying securities and may claim any resulting loss from the seller.
16
Milestone Treasury Obligations Fund |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
May 31, 2015 |
Offsetting of Financial Assets and Derivative Liabilities – The following table presents the Fund’s liability derivatives available for offset, net of collateral pledged as of May 31, 2015:
Gross Amounts Not Offset in the Statement | ||||||||||||||||||||||||
Assets: | of Assets & Liabilities | |||||||||||||||||||||||
Gross Amounts | Net Amounts of | |||||||||||||||||||||||
Offset in the | Assets Presented in | |||||||||||||||||||||||
Gross Amounts of | Statement of Assets | the Statement of | Financial | Cash Collateral | ||||||||||||||||||||
Description | Recognized Assets | & Liabilities | Assets & Liabilities | Instruments | Received | Net Amount | ||||||||||||||||||
Repurchase Agreements | $ | 269,400,000 | (1) | $ | — | $ | 269,400,000 | $ | (269,400,000 | ) | $ | — | (2) | $ | — | |||||||||
Total | $ | 269,400,000 | $ | — | $ | 269,400,000 | $ | (269,400,000 | ) | $ | — | $ | — | |||||||||||
(1) | Repurchase Agreements at value as presented in the Portfolio of Investments. |
(2) | The amount is limited to the derivative liability balanced and, accordingly, does not include excess collateral pledged. |
Security Transactions – Security transactions are recorded on the trade date. Realized gains and losses are recorded on the identified cost basis. The cost of investments for federal income tax purposes at May 31, 2015 is substantially the same as shown on the accompanying portfolio of investments.
Expenses – Expenses of the Trust that are directly identifiable to a specific fund are charged to that fund. Expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative sizes of the funds.
Multiple Class Allocations – Each share of the Fund’s four classes represents an undivided, proportionate interest in the Fund. All income, expenses (other than class specific expenses), and realized gains or losses are allocated daily to each class of shares based on the relative value of the shares of each class. The Fund’s class specific expenses include Shareholder Service fees and distribution fees. In addition, there are differences among the classes of shares with respect to the minimum investment required and voting rights affecting each class.
Federal Income Taxes – It is the Fund’s policy to comply with all sections of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income gains to its shareholders and therefore, no provision for federal income tax has been made.
The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Funds tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2012 - 2014, or expected to be taken in the Fund’s 2015 tax returns. The Fund identified its major tax jurisdictions as U.S. Federal, Nebraska and foreign jurisdictions where the Fund make significant investments; however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
17
Milestone Treasury Obligations Fund |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
May 31, 2015 |
Interest Income and Dividends to Shareholders – Interest income is accrued as earned. Discounts and premiums on securities purchased are accreted and amortized over the lives of the respective securities. Dividends to shareholders from each class of the Fund’s net investment income are declared daily and distributed monthly. Net realized capital gains, unless offset by any available capital loss carry-forwards, are distributed at least annually. Net realized capital gains earned by the Fund are considered short-term gains for tax purposes. Distributions to shareholders for tax purposes were ordinary income.
Indemnification – The Trust indemnifies its officers and trustees for certain liabilities that may arise from the performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Trust expects the risk of loss due to these warranties and indemnities to be remote.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
The Trust, on behalf of the Fund, has entered into an Investment Advisory Agreement with CLS Investments, LLC (the “Adviser”), a subsidiary of NorthStar Financial Services Group, LLC. As compensation for the services rendered, facilities furnished, and expenses borne by the Adviser, the Fund will pay the Adviser a fee accrued daily and paid monthly, at the annualized rate of 0.10% of the average daily net assets of the Fund. For the six months ended May 31, 2015, the Advisor waived $6,728 in advisory fees.
For the six months ended May 31, 2015, the Adviser has agreed to waive any portion of its fees and waive or reimburse any other expenses in order to limit the total annual operating expenses for each share class as follows:
Operating | ||
Expenses | ||
Share Class | per Share | |
Investor Shares | 0.45% | |
Institutional Shares | 0.20% | |
Financial Shares | 0.15% | |
Premium Shares | 0.65% |
As of November 30, 2014, the Adviser has $208,176 of waived expenses that may be recovered by the following dates:
November 30, 2015 | November 30, 2016 | November 30, 2017 | ||
$75,124 | $66,791 | $66,261 |
18
Milestone Treasury Obligations Fund |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
May 31, 2015 |
The Adviser has voluntarily agreed to waive additional fees in order to maintain a positive yield. This agreement may be terminated at any time.
The Trust has adopted a Shareholder Services Plan providing that the Trust may obtain the services of the Adviser and other qualified financial institutions to act as shareholder servicing agents for their customers. Under this plan, the Trust has authorized the Adviser to enter into agreements pursuant to which the shareholder servicing agents perform certain shareholder services.
For these services, the Fund pays servicing fees at an annual rate of the average daily net assets as follows:
Shareholder | ||
Servicing | ||
Share Class | Fees | |
Investor Shares | 0.25% | |
Institutional Shares | 0.10% | |
Financial Shares | 0.05% | |
Premium Shares | 0.25% |
The Fund pays the shareholder servicing agents these amounts with respect to shares owned by investors for which the shareholder servicing agents maintain a servicing relationship pursuant to the Shareholder Servicing Agreement.
For the six months ended May 31, 2015, the Fund incurred shareholder service fees in the amount of $ 273,732. The Fund waived shareholder services fees as follows:
Expense | ||||
Share Class | Waiver | |||
Investor Shares | $ | 33,894 | ||
Institutional Shares | 153,312 | |||
Financial Shares | 5,687 | |||
Premium Shares | 52,495 | |||
Total | $ | 245,388 |
Distributor
The distributor of the Fund is Northern Lights Distributors, LLC (the “Distributor”), an affiliate of the Adviser. The Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act for the Premium Shares. The plan provides that the Fund may finance activities which are primarily intended to result in the sale of the Premium Shares, including, but not limited to, advertising, printing of
19
Milestone Treasury Obligations Fund |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
May 31, 2015 |
prospectuses and reports for other than existing shareholders, preparation and distribution of advertising material and sales literature and payments to dealers who enter into agreements with the Trust. The plan provides for the payment of a distribution fee to the Distributor, prior to any waivers, at an annualized rate of equal to 0.25% of the average daily net assets of the Premium Shares. The plan will only make payment for expenses actually incurred on a first-in, first-out basis. The plan may carry forward for an unlimited number of years any unreimbursed expenses. As of May 31, 2015, there were no unreimbursed expenses.
For the six months ended May 31, 2015, distribution fees paid of the average daily net assets were as follows:
Distribution | ||
Share Class | Fees | |
Premium Shares | 0.00% |
Total distribution fees for the Premium Shares for the six months ended May 31, 2015 were $55,257 with waivers of $55,257.
In addition, certain affiliates of the Distributor provide services to the Fund as follows:
Administration, Fund Accounting, Transfer Agent
Gemini Fund Services, LLC (“GFS”), an affiliate of the Distributor, provides administration, fund accounting, and transfer agent services to the Trust. Pursuant to a separate servicing agreement with GFS, the Fund pays GFS customary fees for providing administration, fund accounting and transfer agency services to the Fund. Certain officers of the Fund are also officers of GFS, and are not paid any fees directly by the Fund for serving in such capacities.
Gemcom, LLC (“Gemcom”)
Gemcom, an affiliate of GFS and the Distributor, provides EDGAR conversion and filing services as well as print management services for the Fund on an ad-hoc basis. For the provision of these services, Gemcom receives customary fees from the Fund.
Chief Compliance Officer
Northern Lights Compliance Services, LLC (“NLCS”), an affiliate of GFS and the Distributor, provides a Chief Compliance Officer to the Trust, as well as related compliance services, pursuant to a consulting agreement between NLCS and the Trust. Under the terms of such agreement, NLCS receives customary fees from the Fund.
Trustees Fees
The Trust pays each Trustee of the Trust who was not an interested person a flat fee of $24,000 per year plus $6,000 for an in-person quarterly meeting or $1,000 per quarter if participating in the meeting by
20
Milestone Treasury Obligations Fund |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
May 31, 2015 |
telephone. In every instance, the cost of the fees are to be allocated among the participating Funds in accordance with a formula that takes into account the overall asset size of each affected fund. The Trust also reimburses the Trustees for travel and other expenses incurred in attending meetings of the Board.
One Trustee and certain officers of the Trust are officers of GFS, NLCS, the Adviser and/or the Distributor. Officers of the Trust and Trustees who are interested persons of the Trust do not receive any direct compensation from the Trust.
NOTE 4. DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of the $18,032 and $18,092 distributions paid during the fiscal years ended November 30, 2014 and November 30, 2013, respectively, was attributed to ordinary income.
As of November 30, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed | Undistributed | Capital Loss | Other | Post October Loss | Unrealized | Total | ||||||||||||||||||||
Ordinary | Long-Term | Carry | Book/Tax | and | Appreciation/ | Accumulated | ||||||||||||||||||||
Income | Gains | Forwards | Differences | Late Year Loss | (Depreciation) | Earnings/(Deficits) | ||||||||||||||||||||
$ | 2,109 | $ | — | $ | (182 | ) | $ | (2,109 | ) | $ | — | $ | — | $ | (182 | ) |
The difference between book basis and tax basis accumulated net investment income is primarily attributable to dividends payable.
At November 30, 2014, the Fund had capital loss carry forwards for federal income tax purposes available to offset future capital gains as follows:
Non-Expiring | Non-Expiring | |||||||||
Short-Term | Long-Term | Total | ||||||||
$ | 182 | $ | — | $ | 182 |
NOTE 5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2014, the Financial Accounting Standard Board issued ASU No. 2014-11 “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.” ASU No. 2014-11 makes limited changes to the accounting for repurchase agreements, clarifies when repurchase agreements and securities lending transactions should be accounted for as secured borrowings, and requires additional disclosures regarding these types of transactions. The guidance is effective for fiscal years beginning after December 15, 2014, and for interim periods within those fiscal years. Management is currently evaluating the impact ASU No 2014-11 will have on the Fund’s financial statements.
21
Milestone Treasury Obligations Fund |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
May 31, 2015 |
NOTE 6. SUBSEQUENT EVENTS
Subsequent events after the date of the Statement of Assets and Liabilities have been evaluated through the date the financial statements were issued. Management has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
22
Milestone Treasury Obligations Fund |
ADDITIONAL INFORMATION (Unaudited) |
May 31, 2015 |
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVAL OF INVESTMENT ADVISORY AGREEMENTS *
At a regular meeting (the “Meeting”) of the Board of Trustees (the “Board” or the “Trustees”) of the AdvisorOne Funds (the “Trust”) held on January 15, 2015, the Board, including those Trustees who are not “interested persons” as that term is defined in the Investment Company Act of 1940, as revised (the “Independent Trustees”), considered the proposed renewal of the current investment advisory agreement (“Current CLS Advisory Agreement”) and, in connection with the possible indirect change of control of the adviser due to the change of control of its parent company NorthStar Financial Services Group, LLC (the “Proposed Transaction”), the proposed approval of an interim investment advisory agreement (“Interim CLS Advisory Agreement”) and new investment advisory agreement (“New CLS Advisory Agreement”) each between the Trust and CLS Investments, LLC (“CLS” or the “Adviser”) on behalf of the Milestone Treasury Obligations Fund (“Milestone”) (collectively the Current CLS Advisory Agreement, Interim CLS Advisory Agreement and the New CLS Advisory Agreement shall be referred to as the “CLS Advisory Agreements”). The terms of each CLS Advisory Agreement were identical with the exception of the effective date and term.
The Board reviewed and discussed written materials that were provided by CLS in advance of the Meeting, CLS’s oral presentation and other information that the Board received at the Meeting. The Trustees relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating the CLS Advisory Agreements and the weight to be given to each such factor. The conclusions reached by the Trustees were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the CLS Advisory Agreements.
Nature, extent and quality of services. As to the nature, extent, and quality of the services provided by CLS to Milestone, the Trustees first discussed the proposed change of control of CLS and its effect on CLS and Milestone. The Board reviewed materials provided by CLS related to the CLS Advisory Agreements, as well as the Proposed Transaction, including a description of the manner in which investment decisions are made and executed, and discussed the benefits of the professional personnel performing services for Milestone, including the team of individuals that primarily monitor and execute the investment process, noting their combined experience of over 40 years. The Board discussed the extent of CLS’ research capabilities, and the emphasis placed on research. CLS’ Chief Investment Officer discussed recent additions to the CLS team, and he indicated his satisfaction with staffing levels. A representative of CLS reviewed and discussed the quality of its compliance personnel. The Board noted that none of CLS’ personnel was anticipated to change as a result of the Proposed Transaction, and that the day-to-day operations of Milestone would not change. Additionally, the Board received satisfactory written responses from CLS with respect to a series of important questions, including whether CLS was involved in any lawsuits or pending regulatory actions. The Board reviewed the
23
Milestone Treasury Obligations Fund |
ADDITIONAL INFORMATION (Unaudited) (Continued) |
May 31, 2015 |
financial information provided by CLS and concluded that CLS has the financial resources to meet its obligations to Milestone. The Trustees viewed the overall services provided by CLS as satisfactory.
Performance. The Board reviewed information on the investment performance of Milestone versus its respective benchmark for the one year, five year, ten year and since inception periods. The Board reviewed Milestone’s historical performance and concluded that performance, in light of current interest rates and CLS’ waiver of fees, was reasonable.
Fees and Expenses. The Board reviewed the advisory fee and expense ratios of Milestone compiled utilizing Morningstar statistics and noted that the Fund’s advisory fee and net expense ratio were lower than the average of the Morningstar category and the Fund Peer Group. The Board then reviewed the contractual fee agreements for Milestone, which stated that CLS had agreed to waive or limit its management fees and/or reimburse expenses at least through December 31, 2016, to limit net annual operating expenses, and found such arrangements to be beneficial to shareholders. The Board concluded that, based on the nature, extent and quality of the services provided, the advisory fee paid by Milestone is reasonable.
Economies of Scale. The Board considered whether economies of scale have been attained with respect to the management of Milestone, and whether there is potential for realization of any further economies of scale. After discussion, it was the consensus of the Board that, because of the current size of Milestone, CLS continues to waive a portion of its advisory fee in order to maintain the expense cap, and therefore the Board will not request any changes to the management fee structure. The Board concluded that economies of scale would be re-evaluated in the future.
Profitability. The Board considered the profits realized by CLS in connection with the operation of Milestone, and whether the amount of profit is a fair entrepreneurial profit for the management of Milestone. It also considered the income and other benefits realized by CLS affiliates from activities and services provided to Milestone. The Board reviewed CLS’ balance sheet as of September 30, 2014 and noted there were no adverse material changes in the financial condition of CLS since the approval of the Current Advisory Agreement at the July 15, 2014 meeting. The Trustees reviewed the profitability analysis provided by CLS, and concluded that to the extent CLS earned a profit from Milestone, the profits appeared reasonable and not excessive.
Conclusion. Having requested and received such information from CLS as the Board believed to be reasonably necessary to evaluate the terms of the CLS Advisory Agreements, and as assisted by the advice of independent counsel, the Board, including a majority of the Independent Trustees, determined that, with respect to the CLS Advisory Agreements separately, (a) the terms of the CLS Advisory Agreements are reasonable; (b) the Proposed Transaction would not result in an unfair burdeen on Milestone or its shareholders; and (c) the CLS Advisory Agreements are in the best interests of Milestone and its shareholders. They concluded that the proposed transaction was not expected to have any negative impact on shareholders, and could benefit shareholders if CLS I strengthened by the
24
Milestone Treasury Obligations Fund |
ADDITIONAL INFORMATION (Unaudited) (Continued) |
May 31, 2015 |
Proposed Transaction. Accordingly, the Board concluded to approve the CLS Advisory Agreements and recommend the New CLS Advisory Agreement to shareholders for approval.
SHAREHOLDER MEETING
AdvisorOne Funds (the “Trust”) held a Special Meeting of the Shareholders of the Milestone Treasury Obligations Fund (“Milestone”) on April 2, 2015, for the purpose of approving an Investment Advisory Agreement between the Trust and CLS Investments, LLC on behalf of Milestone. At the close of business February 11, 2015, the record date for the Special Meeting of Shareholders, there were outstanding 454,714,954 shares of beneficial interest of Milestone.
On April 2, 2015 a quorum of Milestone shareholders was present for the Special Meeting with 69% of the outstanding shares represented in person or by proxy. With respect to approval of the proposed New Investment Advisory Agreement the following votes were cast:
For Approval: 314,022,045 shares voted
Against Approval: 0 shares voted
Abstained: 5,365 shares voted
* | Due to the timing of the contract schedule, these deliberations may or may not relate to the current performance results of the Fund. |
** | Although CLS began managing the Fund in 2011, prior performance is informative because one of the Fund’s portfolio managers has managed the Fund since its inception. |
25
Milestone Treasury Obligations Fund |
EXPENSE EXAMPLE (Unaudited) |
May 31, 2015 |
As a shareholder of the Fund, you incur ongoing costs, including advisory fees; administration fees; shareholder service fees; distribution fees (Premium Shares); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2014 through May 31, 2015.
Actual Expenses
The “Actual Expenses” line in the table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The “Hypothetical” line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or redemption fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Hypothetical | ||||||||||||
Actual | (5% return before expenses) | |||||||||||
Portfolio’s | Beginning | Ending | Expenses | Ending | Expenses | |||||||
Annualized | Account Value | Account Value | Paid During | Account Value | Paid During | |||||||
Expense Ratio | 12/1/14 | 5/31/15* | Period** | 5/31/15* | Period** | |||||||
Milestone Treasury Obligations Fund: | ||||||||||||
Investor Class | 0.08% | $1,000.00 | $1,000.00 | $0.40 | $1,024.53 | $0.40 | ||||||
Institutional Class | 0.08% | $1,000.00 | $1,000.00 | $0.40 | $1,024.53 | $0.40 | ||||||
Financial Class | 0.08% | $1,000.00 | $1,000.00 | $0.40 | $1,024.53 | $0.40 | ||||||
Premium Class | 0.08% | $1,000.00 | $1,000.00 | $0.40 | $1,024.53 | $0.40 |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by the number of days in the period (182) divided by the number of days in the fiscal year (365). |
** | Annualized. |
26
Rev. June 2015
FACTS | WHAT DOES ADVISORONE FUNDS (“ADVISORONE”) DO WITH YOUR PERSONAL INFORMATION? | |||||
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. | |||||
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include:
| |||||
● | Social Security number | ● | Account transactions | |||
● | Employment information | ● | Income | |||
● | Account balances | ● | Investment experience | |||
When you are no longer our customer, we continue to share your information as described in this notice. | ||||||
How? | All financial companies need to share a customer’s personal information to run their everyday business - to process transactions, maintain customer accounts, and report to credit bureaus. In the section below, we list the reasons financial companies can share their customer’s personal information; the reasons AdvisorOne chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information | Does AdvisorOne share? | Can you limit this sharing? |
For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No |
For our marketing purposes — to offer our products and services to you | Yes | No |
For joint marketing with other financial companies | Yes | No |
For our affiliates’ everyday business purposes — information about your transactions and experiences | Yes | No |
For our affiliates’ everyday business purposes — information about your creditworthiness | No | We don’t share |
For nonaffiliates to market to you | No | We don’t share |
Questions? | Call (866) 811-0225 or go www.advisoronefunds.com |
27
Page 2 |
Who we are | ||
Who is providing this notice? | AdvisorOne Funds | |
What we do | ||
How does AdvisorOne protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. | |
How does AdvisorOne collect my personal information? | We collect your personal information, for example, when you | |
● open an account
● give us your income information
● provide employment information
| ● provide account information
● give us your contact information
| |
We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. | ||
Why can’t I limit all sharing? | Federal law gives you the right to limit only
● sharing for affiliates’ everyday business purposes—information about your creditworthiness
● affiliates from using your information to market to you
● sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. | |
Definitions | ||
Affiliates | Companies related by common ownership or control.
They can be financial and nonfinancial companies.
The following companies may be considered affiliates of AdvisorOne:
● CLS Investments, LLC
● NorthStar Financial Services Group, LLC
● Blu Giant, LLC
● Gemini Alternative Funds, LLC
● Gemini Hedge Fund Services, LLC
● Gemini Fund Services, LLC
● Northern Lights Compliance Services, LLC
● Northern Lights Distributors, LLC
● Orion Advisor Services, LLC
● Constellation Trust Company
● NorthStar Topco, LLC
● NorthStar CTC Holdings, Inc. | |
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
● AdvisorOne does not share with nonaffiliates so they can market to you. | |
Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products and services to you.
● Our joint marketing partners include other financial service companies. |
28
Adviser |
CLS Investments, LLC |
17605 Wright Street, Suite 2 |
Omaha, NE 68130 |
Administrator |
Gemini Fund Services, LLC |
80 Arkay Drive, Suite 110 |
Hauppauge, NY 11788 |
Distributor |
Northern Lights Distributors, LLC |
17605 Wright Street, Suite 2 |
Omaha, NE 68130 |
1-866-811-0225 |
Transfer Agent |
Gemini Fund Services, LLC |
17605 Wright Street, Suite 2 |
Omaha, NE 68130 |
1-866-811-0225 |
Custodian |
The Bank of New York Mellon |
One Wall Street |
New York, NY 10286 |
Legal Counsel |
Thompson Hine LLP |
41 South High Street, Suite 1700 |
Columbus, OH 43215 |
Independent Registered Public Accounting Firm |
Tait, Weller & Baker LLP |
1818 Market Street, Suite 2400 |
Philadelphia, PA 19103 |
This report is authorized for distribution only to current shareholders and to others
who have received a copy of The Milestone Fund’s prospectus.
A description of the Fund’s proxy voting policies and procedures is available without charge and
Upon request by calling 1-866-811-0225 or by accessing the
Securities and Exchange Commission’s (“Commission”) website at http://www.sec.gov.
Information regarding how the Fund voted proxies for portfolio securities, if applicable, during
the most recent 12-month period ended June 30, is also available, without charge and upon
request, by calling 1-866-811-0225 or accessing the Funds’ Form N-PX on the Commission’s
website at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the commission for the first and
third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the SEC
website at http://www.sec.gov. The Fund’s Form N-Q may also be reviewed and copied at the
Commission’s Public Reference Room in Washington, D.C.; information on the operation of the
Public Reference Room may be obtained by calling (800)-SEC-0330.
Milestone Treasury Obligations Fund
17605 Wright Street, Suite 2, Omaha, NE 68130
1-866-811-0225
Item 2. Code of Ethics. Not required for semi-annual reports.
Item 3. Audit Committee Financial Expert. Not required for semi-annual reports.
Item 4. Principal Accountant Fees and Services. Not required for semi-annual reports.
Item 5. Audit Committee of Listed Companies. Not applicable to open-end investment companies.
Item 6. Schedule of Investments. Schedule of investments in securities of unaffiliated issuers is included under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Funds. Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders. None
Item 11. Controls and Procedures.
(a) Based on an evaluation of the registrant’s disclosure controls and procedures as of a date within 90 days of filing date of this Form N-CSR, the disclosure controls and procedures are reasonably designed to ensure that the information required in filings on Forms N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not required for semi-annual reports.
(a)(2) Certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 (and Item 11(a)(2) of Form N-CSR) are filed herewith..
(a)(3) Not applicable.
(b) Certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 (and Item 11(b) of Form N-CSR) are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) AdvisorOne Funds.
By (Signature and Title)
/s/ Ryan Beach
Ryan Beach, Principal Executive Officer/President
Date 8/5/15
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)
/s/ Ryan Beach
Ryan Beach, Principal Executive Officer/ President
Date 8/5/15
By (Signature and Title)
/s/ Brian Curley
Brian Curley, Principal Financial Officer/Treasurer
Date 8/5/15